Silver stuck below $30 as dollar bounces back

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Silver slumped below Monday’s close and was near $29.40 in Tuesday’s New York trading.

XAGUSD faces selling pressure as the US dollar has bounced back strongly after correcting on Monday. The DXY Dollar Index, which tracks the greenback’s value against six major currencies, rebounded from 105.40.

The dollar recovered as investors become doubtful over the Fed interest rate outlook. Currently, markets expect that the Federal Reserve will start reducing interest rates from the September meeting and subsequent rate cuts will be announced in the November or December meeting.

However, Fed policymakers argue in favour of maintaining interest rates at their current levels until they see inflation declining for successive months.

Fed Governor Michelle Bowman said in an interview Tuesday that she doesn’t see any rate cut this year. Bowman added that rate cuts at this point are inappropriate, and the option of more rate hikes remains on the table if progress in the disinflation process appears to stall or reverse in the future.

Going forward, investors will focus on the US core Personal Consumption Expenditure Price Index (PCE) for May, which will be published on Friday. The core PCE price index data is the Fed’s preferred inflation measure, and it will provide fresh cues on when and how much the central bank will reduce interest rates this year.

Silver daily chart XAGUSD by TradingView

(Source: OANDA)